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Subject: Superannuation Guarantee - Ordinary Time Earnings

Question:

Should Waiting Time be included in OTE for superannuation guarantee purposes under subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?

Answer:

No, please see Explanation below.

Relevant facts and circumstances

The employer is a transport company operating in Australia.

The employer's employees are employed under the relevant Award.

Under the Award, a clause states "An employee who is engaged as a transport driver on a single day charter may have a rostered shift divided into two working periods, with no requirement to return to the depot during the rostered shift. Such an employee will be paid waiting time at the rate of 50% of the ordinary rate of pay plus any applicable penalty or loading, provided that the waiting time so paid for will not be taken into account in the computation of hours for overtime purposes".

MYOB software automatically works out the 9% super payment for ordinary time worked, which the employer has been paying correctly.

The employer has not been paying superannuation on Waiting Time to date.

Below are extracts of relevant clauses, defining terms and conditions as contained within the Award:

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· waiting time means such time, excluding meal breaks, in which no demand for work is made upon the driver and the driver is placed under no restraint as to their movements and is not otherwise on call by the employer

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Part 5 - Hours of Work and Related Matters

21 Ordinary hours of work and rostering

21.1 The ordinary hours of work will be an average of 38 hours per week and may be worked any day of the week in the following manner:

(a) 38 hours on up to five days within a work cycle not exceeding seven consecutive days;

(b) 76 hours on up to 10 days within a work cycle not exceeding 14 consecutive days;

(c) 114 hours on up to 15 days within a work cycle not exceeding 21 consecutive days; or

(d) 152 hours on up to 20 days within a work cycle not exceeding 28 consecutive days.

…

21.3 Ordinary hours, exclusive of meal breaks, must not exceed 10 hours on any one day.

…

21.5 An employee who is engaged as a transport driver on a single day charter may have a rostered shift divided into two working periods, with no requirement to return to the depot during the rostered shift. Such an employee will be paid waiting time at the rate of 50% of the ordinary rate of pay plus any applicable penalty or loading, provided the waiting time so paid for will not be taken into account in the computation of hours for overtime purposes.

…

23 Overtime and penalty rates

23.1 Overtime rates will be paid for all time worked in excess of the hours in clause 21.1 or any hours in excess of the rostered ordinary on any day at the rate of time and a half for the first three hours and double time thereafter.

…

Relevant legislative provisions

Superannuation Guarantee (Administration) Act 1992 subsection 6(1).

Explanation

Summary

All amounts of earnings in respect of employment are in respect of the employee's ordinary hours of work unless they are remuneration for working overtime hours, or are otherwise referable only to overtime or to other hours that are not ordinary hours of work.

Waiting time is not considered to form part of the ordinary hours of work. Therefore, remuneration in relation to waiting time is not required to be included as OTE for superannuation guarantee purposes under subsection 6(1) of the SGAA.

Detailed reasoning

Subsection 6(1) of the SGAA defines OTE in relation to an employee to mean:

(a)  the total of:

(i)  earnings in respect of ordinary hours of work other than earnings consisting of a lump sum payment of any of the following kinds made to the employee on the termination of his or her employment:

(A) a payment in lieu of unused sick leave;

(B) an unused annual leave payment, or unused long service leave payment, within the meaning of the Income Tax Assessment Act 1997;

(ii) earnings consisting of over-award payment, shift loading or commission; or

If the total ascertained in accordance with paragraph (a) would be greater than the maximum contribution base for the quarter - the maximum contribution base.

The maximum contribution base for the 2012/13 year of income is $45,750 per quarter. This amount is indexed annually according to the indexation factor.

Superannuation Guarantee Ruling SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages' (SGR 2009/2) explains the meaning of OTE as defined in subsection 6(1) of the SGAA. The meaning of OTE is relevant to employers for the purposes of calculating the minimum level of superannuation support required for individual employees under the SGAA.

Paragraphs 13 and 14 of SGR 2009/2 explain the meaning of 'ordinary hours of work' and state that:

13. An employee's 'ordinary hours of work' are the hours specified as his or her ordinary hours of work under the relevant award or agreement, or under the combination of such documents, that governs the employee's conditions of employment.

14. The document need not use the exact expression 'ordinary hours of work', but it needs to draw a genuine distinction, for the purposes of the award or agreement, between ordinary hours and other hours. In particular, it would be expected that the other hours are remunerated at a higher rate (typically described as overtime) than the ordinary hours, or otherwise identifiable as a separate component of the total pay in respect of non-ordinary hours

The Commissioner's view on what earnings are taken to be made 'in respect of ordinary hours of work' is provided in paragraph 25 of SGR 2009/2 which states:

All amounts of earnings in respect of employment are in respect of the employee's ordinary hours of work unless they are remuneration for working overtime hours, or are otherwise referable only to overtime or to other hours that are not ordinary hours of work. There is no such thing as earnings that are merely in respect employment and are not OTE because they are not in respect of any particular hours of work.

Accordingly, in line with the above, all amounts of earnings in respect of employment should be considered to be in respect of the employee's ordinary hours of work unless they are remuneration for overtime or other hours that are not ordinary hours of work.

An employee's 'ordinary hours of work' are the hours specified as his or her ordinary hours of work under the relevant award or agreement, or under the combination of such documents, that governs the employee's conditions of employment.

Under the Award, ordinary hours of work is covered by Clause 21 and is an average of 38 hours per week worked on any day of the week in a manner as described. Subclause 21.5 of the Award provides for waiting time where an employee, who is on a single day charter and has a rostered shift divided into two working periods, receives waiting time for the period in between those shifts. Waiting time is paid at 50% of the ordinary rate of pay. During waiting time no demand for work is made upon the driver and the driver is placed under no restraint as to their movements and is not otherwise on call by the employer.

Waiting time is specifically provided for in the Award as separate time from ordinary time. It has not been included in the Award as an allowance, overtime or a penalty rate (covered specifically by Clause 15 and Clause 23 of the Award). Waiting time is not to be taken into account in the computation of hours for overtime purposes and overtime is available only if the employee works in excess of the hours specified by subclause 21.1 of the Award or any hours in excess of the rostered ordinary hours. A clear distinction is made in the Award with regards to rostered ordinary hours and waiting time hours and ordinary hours are paid at the ordinary rate whereas waiting time hours are paid at a different rate (50% of the ordinary rate).

Therefore, waiting time is considered to be other hours that are not ordinary hours of work and remuneration paid for waiting time is not considered to be in respect of the employee's ordinary hours of work. As a result remuneration in relation to waiting time is not required to be included as OTE for superannuation guarantee purposes under subsection 6(1) of the SGAA.